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Critical evaluation of the potential of stakeholder theory to contribute to understanding of large-scale public service IT projects and their implementation


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Critical evaluation of the potential of stakeholder theory to contribute to understanding of large-scale public service IT projects and their implementation

Critical evaluation of the potential of stakeholder theory to contribute to understanding of large-scale public service IT projects and their implementation

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  • 1. Critical evaluation of the potential of stakeholder theory to contribute to understanding of large-scale public service IT projects and their implementation Kennedy T. Mbwette, 2013 Introduction As information technology (IT) becomes an important element in numerous industries, the number of technology projects increases and their sizes get larger and more complex regardless the given sector of implementation. This is due to the belief that IT can enhance organization performance, both at the operational and strategic level (Ashurst, et al., 2008). One distinguishing characteristic for large-scale IT projects compared to other IT projects according to a research by Bloch, et al., (2012) is that they cost not less than £10 million for implementation. Due to the great size and complex nature, large scale IT services are commonly prone to risks of cost and schedule overun, pausing high failure rate and most commonly poor value creation (Carr, 2003). In this essay, public service IT projects will refer to those IT projects that are either financed by public funds, or are mainly intended to become beneficial to the public. Some examples of large-scale public service (LSPS) IT projects include eGovernment initiatives in New York State and NHS IT project in UK (Brennan, 2005; O'Neill, 2000). The nature of public services provision lets services be contracted by public officials with organizations on behalf of the clients and end-users; the citizens in this case. Through this approach the purchaser is usually not the beneficiary thus resulting in differences in interests and information between involved parties. The agents may not always act in the interest of the beneficiary intentionally or unintentionally. Moreover, the principal would commonly fail to have influence on the agent to resolve occuring differences, most commonly due to additional costs and difficulties of selecting another agent (Monroe, 1999 cited by Murdok, 2004). Large-scale public service projects as part of public service systems suffer from public sector bargain which Hood (2000, p 8) defines as “any explicit or implicit understanding between senior public servants and other actors in a political system over their duties and entitlements relating to responsibility, autonomy and political identity, and expressed in convention or formal law or a mixture of both”. However, public-sector officials perform their tasks for public interests hence have a desire to create project value to the public and preserve public trust. Due to public
  • 2. 2 projects settings such as tight budget and increased tax money accountability from the government, public-sector managers seek to adopt modern management and performance measurement tools to understand and implement their projects (Flak & Dertz, 2006). Public-sector managers often experience dilemmas and difficulties in conducting large- scale public service projects due to conflicting objectives and stakeholder interests involved throughout the project (Murdock, 2004). Moreover, improperly managed stakeholder concerns often lead to conflicts and controversies about implementation of the project, which could result to projects delays, cancellation or failure (Olander & Landin, 2005). The description of large-scale public service IT projects appears to be of complex nature causing difficulty in both understanding and implementation due to the number of stakeholders involved, their differing interests and level of influence on the particular projects. This essay describes the potential for stakeholder theory to contribute to our understanding of large-scale public service IT projects and their implementation using an example of an e-Governance initiative from New York. Stakeholder Theory Stakeholder theory has its roots from management literature and was developed as a response to the need for attending to objectives of stakeholders with decisions that have rational foundation, so as to successfully carry out strategic processes in the context of profit-organizations (Flak & Dertz, 2006). Freeman (1984) proposed a managerial perspective that identifies key stakeholders of the firm as owners, customers, employees and suppliers. He later added further groups to include government, competitors, consumer advocates, environmentalists, special interest groups and media (Bailur, 2006). Freeman (1984) argued that this was a better way to explain the complex interaction between different interest groups in corporations. As a management instrument, stakeholder theory’s attributes, power, urgency and legitimacy are used as claims to define the importance of a certain stakeholder in organizations’ projects (Austen, et al., 2008; Flak & Dertz, 2006). The theory can be divided into three approaches (Austen, et al., 2008; Donaldson & Preston, 1995), one of them (descriptive) depicting “what happens” by describing and explaining specific corporate behaviours and characteristics that help to understand how managers deal with stakeholders and how they represent their interests. However, Treviño & Weaver (1999) as cited in Bailur (2006) believe that the fundamentals of this approach are ill-defined as they are only descriptive and lack clear objective.
  • 3. 3 The second approach described by the authors is instrumental, which outlines “what happens if” by identifing the connections between stakeholder, management and achievements of the corporate objectives in order to study the consequences of taking in to account stakeholders in management (Austen, et al., 2008). A general critism to this approach when applied to both private and public sector is that generally stakeholder involvement is not feasible and is not always linked directly to organizational success (Bailur, 2006). Lastly is normative which suggests “what should happen” by interpreting the function of the corporation through identification of moral or philosophical guidelines as linked to the activities or management of the corporation (Fontaine, et al., 2006; Donaldson & Preston, 1995). However, this approach has led to controversial understanding when applied to private sectors since businesses are not charities but profit making entities and that it is not possible to satisfy all stakeholders all the time (Bailur, 2006). The concepts of stakeholder theory as it originates and pertains to the private-sector organizations establishes a potential to be applied in public-sector settings also for either managerial decision making or understanding organizations and their implementations (Scholl, n.d.; Donaldson & Preston, 1995). It has also been applied to a number of other fields such as social responsibilities, education, environment management, and information technology (Austen, et al., 2008). It can be seen that the theory can contribute to understand projects by highlighting the importance of consideration of the stakeholders during planning, whether due to moral value for considering them or due to their influence on the project. It has a potential to assists in identifying the stakeholders including who and what they affect. It can also assist to classify the stakeholders as internal and external, primary and secondary, or based on evaluation of their influence and importance towards the project. However, the theory does not give a clear guidance on how to exactly understand the settings and implementation, thus various frameworks of stakeholder theory exists that assist to achieve this as discussed in the next section.
  • 4. 4 Applying Stakeholder Theory in LSPS IT projects One way that stakeholder theory can contribute to researchers’ understanding of large-scale public service (LSPS) IT projects and their implementation is by applying its frameworks in a normative manner as a template against which actual project practises can be compared (Bailur, 2006). The theory can alternatively be used as a research tool helping to derive even further explanation on the basis of stakeholder behaviours and their possible ways to be managed (Donaldson & Preston, 1995). Through an e-Government initiative example from New York (Pardo, et al., 2000), stakeholder needs analysis was conducted for overhauling of the Central Accounting System of the state (CAS). The major overhaul implementation was aligned with potential for business process restructuring and cross government branches, agencies and level integration. The project aim was also to provide a streamlined and integrated accounting system that serves both government entities and private-sector firms. This created a sophisticated nature of the system with a potential for reducing costs, process and services integration, improving service delivery and enhancing transparency and accessibility. Through a framework proposed by Tenner & Schroeder (1999) that uses a combination of Mitchell et al.’s (1997) concept of stakeholder identification along lines of power, legitimacy and urgency, and the diagnostic topology of their potential for collaboration against threats concept by Blair & Whitehead’s (1988), the project team was able to identify three groups namely primary, secondary and tertiary groups, that can advance or shut down the project at almost any given point in time (Scholl, n.d.). However, this illustrates a shortcoming of the theory which Fassin (2008) refers to as heterogeneity within stakeholders and pressure groups. Fassin argues that members within groups are not all homogenous and the groups or subgroups may have multiple interests and roles. Furthermore, even though the theory holds the potential to identify and group stakeholders, other authors argue that grouping approach of the theory widely focuses on heterogeneity across groups than within groups hence resulting in false perceptions on some of the groups and their members (Wolfe & Putler, 2002). This can be seen in the groups identified in the CAS project for instance, while the Division of Budget and the Office for Technology were both placed under the primary group as they have a common stake, they do not share exactly the same objective. Likewise, the State Assembly, also identified in primary group, is not necessarily homogenous as the legislative body consists of a number of members from different parties, each representing a
  • 5. 5 different population with different backgrounds, thus they could have conflicting interests causing clashing in project priority. Additionally, the theory demonstrates another weakness that Fassin (2008) refers to as multiple inclusion which occurs when some individuals belong to more than one stakeholder group at the same time. This could be due to occupying more than one role simultaneously either within subgroups or cutting across them. An example could be, while some individuals are members of the Division of the Budget, they also fall under a group of Non-Governmental entities which consists of citizens and tax payers, who are not categorized as primary groups. Thus such individuals could have varying influences on the project at different stages according to their given roles at particular instances. Other authors suggest stakeholder analysis to be conducted in a manner that considers specific stakeholders’ role at a given moment (Persquex, 2005 as cited in Fassin, 2008). Additionally, the official CAS Stakeholder Needs Analysis report states that “the stakeholder analysis identified several hundred agencies and private sector organizations with a stake in the CAS. It was not possible to include participants from all these stakeholders” (Pardo, et al., 2000, p.9). This illustrates another key weakness of stakeholder theory as Trevino & Weaver(1999) mention, hence proving that in a large-scale public service IT project it is impossible to accommodate all stakeholders all the time due to the great number of stakeholders and their complex nature. The CAS Stakeholder Need Analysis reports recommended continued inclusion of stakeholders creating a state similarly highlighted by Weiss (1995) that may result to difference between the initially identified stakeholders and the actual stakeholders. Pouloudi and Whitley (1997) suggest the identification process to be repeatitive in order to determine as many stakeholders as possible. However, for large IT projects like CAS which identified more than 700 public and private organizations, and which state agencies process over 17.5 millions transaction per day from different users through the system, it can clearly be seen that no matter how many iterations were done it would still be impossible to include all the stakeholders. The CAS analysis team applied Blaire & Whitehead’s diagnostic topology to understand in more detail both the potential and threat for collaboration for the primary stakeholder groups, and also to obtain similar perceptions in a more general manner for the secondary and tertiary groups (Scholl, n.d.). On completion of stakeholder identification and mapping, the team’s strategic management proposal was to keep the primary group informed throughout the project and seek
  • 6. 6 continuous feedback from them on the project plans (Pardo, et al., 2000). This indicates the benefit of using the system to help understand and determine how to manage the identified stakeholders; however, based on the secondary sources, it does not appear as if behaviour of the groups and the way they would work together was determined or even accomplished due to the massive amount of identified stakeholders and their complex relationships. Concession and bargains to the key groups done through a series of workshops that involved 8 groups of CAS user representatives demonstrated the normative strength of the theory that encourages acknowledging concerns of all stakeholders in a dialogue to help reconcile conflicting interests (Olander & Landin, 2005). The approach was found to be of great importance due to further discoveries and confirmation of major deficiencies of the existing system, and also increased support from the stakeholders through continuous involvement (Scholl, n.d.). The above discussion using CAS project example has clearly illustrated how stakeholder theory has a potential to contribute to understanding of large-scale public services IT project through the work of the CAS stakeholder analysis team. This has been through the way they were able to identify, map, predict and identify behaviours, potential collaboration or threats, and proposing the way forward, all through instrumental and normative application of the theory. As highlighted, the CAS project had a social responsibility to all possible stakeholders and had to ensure satisfaction of all groups even the indirect groups such as the tax payers. The project was also responsible for providing reliable services to all primary stakeholders and meeting their expectations and legislative trends. These issues could all be collaboratively addressed by the descriptive, instrumental and normative approach of the theory. A different instrumental approach which regards to implementation is that related to the development and sustainability of the project to be achieved when all possible stakeholders have been identified, and a relevant management approach is deployed through establishing strategic importance of stakeholder groups (Austen, et al., 2008). This was evidently illustrated in the CAS project as the stakeholder analysis process contributed to obtaining abundance of information, integration and support from stakeholders and also state-wide visibility (Pardo, et al., 2000). Stakeholder theory through its frameworks has shown its potential to contribute to LSPS IT projects understanding when used in a normative manner, whereby it could be used as a best practise template from which actual practice on large-scale public service IT project could be associated to understand or determine the project implementation.
  • 7. 7 An alternative approach is to use the theory as a tool on primary or secondary literature on large-scale public service IT projects in order to get a deeper understanding of the large network of stakeholders involved such as by iterative stakeholder identification, or through various existing stakeholder mapping tools such as Mendelow’s (1981) original Power/Dynamism, Johnson and Scholes (1999) Power/Interest or using Harrison and St John (1996) stakeholder managing approach to identify their needs, behaviours and determine how they are managed. Further contribution of Stakeholder Theory in LSPS IT projects Stakeholder theory can be used as a tool to perform further investigation for instance, grouping stakeholders in power/interest matrix can contribute to understand stakeholder effects to the project and its implementation through illustration of their relationships and communications. It is even more valuable in IT projects to analyse stakeholder perspectives to informatics lifecycle since it is potentially useful at all stages, from initial development of technology through to research on the impacts of technologies (Bailur, 2006). On the other hand the theory has a potential to attempt but fails to clearly explain behaviour of the stakeholders. For instance, the positive response by the agencies could be due to actual willingness to participate as a result of their involvement or could be due to the political power of the New York State Office on them. Similarly with the private agency behaviours; perhaps they were proactive because they are self-financing organisations therefore they were interested in the initiatives since it would save them the costs of deploying individual systems or reduce operational costs imposed by the existing paper-based business process system. The stakeholder theory can also be used for analysis of the management strategies involved in a project such as those that were taken for the CAS projects. The strategy found according to the official CAS stakeholder analysis (Pardo, et al., 2000) was to keep primary stakeholders informed and seek for their continuous feedback and convergence of efforts, involve users to assist their understanding of current CAS functionality and terminology, and to consult agencies on their operational encounters in order to increase knowledge for extended functionalities and future predictions. This therefore showed the contribution of the theory to assist to identify both what was done in the projects and even what was later changed through analysis. Moreover, it shows contribution through predictive capabilities in terms of those areas that would have caused either success or failure and also how they should have been done; example the consequences that could have resulted from exclusion of the initially unidentified stakeholders.
  • 8. 8 Conclusion Even though the stakeholder theory was created for the private sector firm, the discussion from the CAS project has given an insight of its potential to contribute to understanding of large-scale public service IT projects and their implementation. It has demonstrated its ability to not only contribute to our understanding, but also provide a guide to strategic management on such projects based on their complicated composition that make their management resemble private-sector particularly due to the network-nature. However, major weaknesses of the theory have been highlighted such as subjectivity of categorization process as analysis teams are likely to be influenced by their backgrounds, environment or people involved in the process. It is also prone to indirect limitations such as in terms of honesty and reliability of the collected stakeholder information. Similarly, stakeholders’ influence, interest and power changes with stages thus generalization is usually problematic, such as grouping taxpayers in tertiary, while they have a great potential power to obstruct project implementation. Even with the demonstrated potential capacity to contribute to understanding large-scale public IT projects, some authors find the theory unreliable to public project settings example due lack of appropriate toolkits that facilitates identification of the stakeholders (Tennert & Schroeder, 1999). Furthermore it can be generalized as inadequate in explanation of process, linkage of internal and external entities, sufficient attention to the context and also the levels for analysis that the projects operate (Key, 1999).
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